Hong Kong and Qatar Sign Comprehensive DTA

May 31, 2013 Posted by China Briefing Reading Time: 2 minutes

May 31 – On May 13, Hong Kong and the State of Qatar signed a comprehensive double taxation avoidance agreement (DTA). The DTA will greater enable cross-border trade connections between the two countries, and will encourage enterprises in Qatar to further expand their business networks in Hong Kong. With this latest DTA, Hong Kong has extended its total number of DTAs to 29.

With the new DTA, the withholding rate on interest (which is currently 7 percent) and on dividends will be reduced to zero, while the withholding rate on royalties will be kept at 5 percent.

The DTA will come into force when both nations finalize their respective ratification procedures. Specifically, as stated in the agreement, the implementation of the DTA will occur during the following circumstances:

In Hong Kong, the DTA will be implemented on “any year of assessment beginning on or after April 1st of the calendar year following the year in which the agreement enters into force.”
In Qatar, the DTA will have effect “(i) with regard to taxes withheld at source, in respect of amounts paid or credited on or after January 1st in the calendar year following the year in which the DTA enters into force; (ii) with regard to other taxes, in respect of taxable years on or after January 1st in the calendar year following the year in which the DTA enters into force.”

Hong Kong’s Inland Revenue Department collected a record breaking HK$242 billion (US$31.2 billion) in 2012-2013, a 2 percent year-on-year increase. The forecast for overall tax collection this year is predicted to set a new high of HK$246 billion (US$31.3 billion).

Hong Kong has entered into five other DTAs over the past two months with Malaysia, Mexico, Canada, Italy and Guernsey. Hong Kong’s next regional targets for DTAs include Europe, Asia-Pacific, the Middle East and Africa.

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Double Taxation Avoidance Agreements
In this issue, we look at the evolution of the legal framework of double taxation agreements in China, including the foundations of anti-avoidance, obligations in reporting offshore transactions, how to qualify as a beneficial owner and how to claim treaty benefits. We also outline the interpretations given in Circular 75 of the China-Singapore DTA, which was the first time that the Chinese tax authorities really opened up about DTA interpretations.